A preface to the newsletter: After the S&P 500 briefly reached a new all-time high on Monday, the week ended with the Nasdaq suffering its worst decline since April 2025.
In this week's newsletter I cover the AI/tech selloff and what it reveals about the gap between AI enthusiasm and earnings reality. I also explain why a downturn in the tech sector has had an outsized impact on the S&P 500, even though the other sectors are performing well. And in this week's Longevity Science Foundation spotlight I summarize an article written about the hype vs reality of common water contamination risks (spoiler alert: fluoride is safe to drink).
Lastly, on a more personal note relating to my financial planning practice - my wife and I are expecting our first child in September. There are many benefits to running my own practice except that cannot take a prolonged parental leave, however I will be scaling back my hours for the first month or two until we get settled into a routine. My top professional priority is always my current clients, therefore I will be pausing taking on any new clients after August 1st in order to manage my workload once the baby arrives. If you, or anyone you know, are considering inquiring about becoming a client of mine, then please reach out before the August 1st deadline.
As always, please don't be shy about sharing any feedback and please feel free to forward this on to anyone else who might be interested in reading it.
Have a nice week ahead,
Kevin
Stocks
It was a rough week, especially for technology investors. The S&P 500 briefly crossed 7,600 for the first time in history on Tuesday, which felt like a continuation of the past several weeks' momentum... but then the bottom fell out. A combination of fresh Iran-U.S. military exchanges that reversed peace deal optimism, a Broadcom earnings report that fell short of inflated AI expectations, and a jobs report that killed any lingering hope for a near-term Fed rate cut sent stocks sharply lower by the close on Friday. The S&P 500 finished the week down approximately -2.5%, the Nasdaq fell -4.5% (its worst weekly decline since "Liberation Day" in 2025), while the Dow, which is tilted more towards value stocks, finished only down -0.2%. The AI chip sector in particular lost over a trillion dollars in market value across Thursday and Friday. Overall it was a bad week to be concentrated in technology, though a diversified portfolio absorbed the damage much better than a pure tech portfolio would have.
Bonds
Bonds gave back some ground, but nothing like what we saw in the stock market this week. The U.S. economy added 172,000 jobs in May, more than double the 80,000 consensus forecast, and prior months were revised sharply higher as well. That kind of economic strength reduces the odds of a Fed rate cut, and markets priced that in immediately: the 10-year Treasury yield climbed to approximately 4.55% by Friday's close, up from around 4.47% at the end of the prior week. When yields rise, existing bond prices fall. The good news is that shorter-duration bonds (those maturing in one to three years) were barely affected, and money market funds and Treasury bills are still paying meaningful yields.
Oil
Oil was a major market driver this week, and not in the direction anyone wanted. Crude oil climbed back toward $93 per barrel, as the Iran-U.S. ceasefire fractured. The peace deal that felt imminent just last week now appears to be on indefinite hold. Energy prices are rising again, which matters for inflation, for the Fed's flexibility on interest rate policy, and for the cost of nearly everything you buy.
Iran peace deal optimism gives way to fresh military exchanges
One week ago, the market was pricing in an imminent resolution with Iran. This week, that optimism ran directly into a new round of military exchanges. U.S. forces launched strikes on Iranian radar sites along the coastline after intercepting Iranian drones headed toward the Strait of Hormuz. Iran declared the strikes a "clear violation" of the fragile ceasefire, announced that negotiations were "at a deadlock", and suspended talks with U.S. intermediaries entirely. Furthermore, over the weekend Iran fired missiles at Israel, amplifying the return to hostilities. Oil surged more than 6% on the news, erasing all of the prior week's energy-price relief.
I want to be direct about what I think is happening here. The ceasefire has been violated by both sides in the weeks since it was declared, and the underlying issues (nuclear enrichment, sanctions relief, Iranian uranium stockpiles, and who controls navigation through the Strait) have not been resolved. The "largely negotiated" language from President Trump last week turned out to be just optimistic framing, which is a pattern we have seen in his messaging throughout this conflict. I still believe a negotiated resolution is the most likely outcome because neither side has an interest in fighting this war indefinitely. But the path to that resolution is clearly going to be bumpier than the market assumed. Until a durable agreement is actually signed, I would expect energy prices to remain elevated and volatile, and I would expect markets to continue swinging on every Iran headline. That is the environment we are in.
Broadcom's AI guidance disappoints and the entire chip sector gets punished
Broadcom, one of the world's largest chipmakers, reported Q2 earnings on Wednesday, and the headline numbers looked genuinely impressive: AI semiconductor revenue more than doubled year-over-year to $10.8 billion, a 143% increase, and CEO Hock Tan reiterated his forecast for over $100 billion in AI chip revenue in 2027. But markets zeroed in on what the company did not do. Broadcom's forecast for next quarter's revenue came in at $16 billion, below the $17.2 billion that analysts had expected. More importantly, the company did not raise its full-year AI revenue forecast. When a stock is priced for continuous acceleration, that can be all it takes to scare away investors.
Thursday and Friday's selling was severe. Broadcom dropped more than -17% from Wednesday's opening price. Micron, which crossed $1 trillion in market cap just last week, lost over -20%. Intel and AMD each lost close to -15% and Nvidia lost around -11.5%. Over a trillion dollars in market cap evaporated from the semiconductor sector in forty-eight hours. Analysts at HSBC flagged a potential slowdown in AI spending and a slide in chip prices as their primary concerns going forward.
Here is my read: what happened Thursday and Friday was not about Broadcom's fundamentals, it was about positioning. The semiconductor sector is the most crowded trade on Wall Street. When a stock/sector is that popular and a quarterly outlook misses expectations, momentum investors exit quickly and passive index funds follow, causing the selling to amplify well beyond what the underlying news warrants. Broadcom is still growing AI revenue at 143% year-over-year. The demand for AI chips is real. But the stocks had priced in a scenario where that growth would accelerate indefinitely, and any deviation from that script triggers a stampede for the exits. This is precisely why I keep returning to the importance of diversification, which I will cover in more detail in the Personal Finance section below.
A blockbuster jobs report turns into bad news for stocks
Friday's May employment report was genuinely good news that happened to arrive at the worst possible moment. The economy added 172,000 jobs (versus 80,000 estimated), and prior months were revised significantly higher as well. Unemployment held steady at 4.3% and wage growth remained moderate at 3.4% year-over-year (it's also worth mentioning that wage growth at 3.4% is still lagging inflation at 3.8%).
In an ordinary environment, a report like this would be very positive. But in the current environment, where the market has been holding out hope for interest rate cuts, strong economic data is actually a negative. A good labor market gives the Federal Reserve no reason to ease rates. Markets immediately priced out any chance of a June cut from Warsh's first Fed meeting (scheduled for June 16–17), and the 10-year Treasury yield spiked. That, layered on top of the Broadcom selloff already in progress, amplified Thursday's damage into Friday's rout. I want to note though: a strong labor market is a genuinely good thing for the economy, it just means the "higher for longer" interest rate story is going to be with us for the foreseeable future.
"When you have these super moves like we've seen in the chip stocks, the memory stocks, the [stock buying] trend followers, the momentum players...whenever it goes off the trend, they're out because they're just riding that train, and that's what we see today." - Jeremy Siegel, Professor Emeritus of Finance, Wharton School; Chief Economist at WisdomTree, commenting after the market close on Friday
What Siegel is describing here is the difference between a fundamental selloff and a positioning selloff.
A fundamental selloff happens when the underlying business actually deteriorates; earnings collapse, demand for their goods evaporates, or a company reveals something genuinely troubling (remember Enron?).
A positioning selloff happens when a trade gets so crowded that any stumble sends everyone for the exit at once, not because the business is broken, but because the stock's price is based on such lofty expectations that any deviation is perceived as a negative.
This week's AI/tech stock crash has the hallmarks of a positioning selloff. Broadcom's revenue is still growing at 143% year-over-year. The company still expects $56 billion in AI chip revenue this fiscal year and over $100 billion in 2027. The underlying demand is not broken. What broke was the narrative of limitless, uninterrupted acceleration, and the momentum players who were riding that narrative got out immediately.
Does this mean the selloff is over? Not necessarily. Siegel is right that these kinds of sharp, momentum-driven reversals are not uncommon in the midst of a greater rally, but they can extend for weeks as investors digest new information and recalibrate expectations. What I tell my clients is this: if you own a stock because you believe in the fundamentals, a -15% selloff on the back of one guidance miss is noise, not signal. If however, you own a stock because it is trending and you want to ride the momentum upward, this week was a reminder that momentum cuts both ways. The question you have to ask yourself is: which investor am I?
The S&P 500 Is Not As Diversified As You Think
This week's violent selloff in AI/tech stocks came as a shock to many investors who believed they were diversified because they owned S&P 500 index funds. If that includes you, what happened this week is worth understanding, because it reveals something important about how index funds actually work.
The S&P 500 is a market-cap weighted index. That means the largest companies represent the largest share of the index, and those large companies are disproportionately concentrated in a single sector: technology and AI-adjacent businesses. Today, the ten largest companies in the S&P 500 (a group that includes Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, Broadcom, and a handful of others) represent roughly 35% of the entire index's value. The technology sector alone accounts for approximately 32% of the index. This means that when you put money into an S&P 500 index fund, you are not putting an equal amount into 500 companies. You are putting roughly one-third of your money into a cluster of technology giants, and the remaining two-thirds is spread across the other 490 or so companies in the index.
What this looked like in practice this week
When Broadcom dropped and dragged the broader semiconductor sector down, an investor who owned an S&P 500 index fund still felt the pain. This was not because they made a concentrated bet on AI/tech stocks, but because the index itself is concentrated in that sector. A truly "diversified" portfolio in the traditional sense (where no single sector dominates) would have absorbed this week's selloff much better. Sectors like utilities, energy, consumer staples, healthcare, and financials all held up far better than tech this week.
Why does this concentration exist?
The S&P 500's market-cap weighting is self-reinforcing. Since technology stocks have recently risen faster than other sectors, they automatically represent a larger share of the index. In turn, this means that index funds that track the S&P 500 must buy more of those stocks too, which is a self-reinforcing cycle that puts further upward pressure on prices. This has been a beneficial dynamic for the last decade, as tech stocks went from representing roughly 18% of the S&P 500 in 2013 to over 30% today. But it also means that when tech sells off, the damage is amplified in any portfolio that is simply "tracking the S&P 500."
Does this mean you should avoid index funds?
Not at all. Index funds remain one of the most cost-effective and tax-efficient ways to invest, and historically over long time horizons they outperform the vast majority of actively managed funds. But it does mean that "owning the S&P 500" is not synonymous with "being broadly diversified." There is an important distinction between diversification across individual stocks (which the S&P 500 provides) and diversification across sectors and asset classes (which requires a more intentional approach).
What healthier diversification looks like
There are several schools of thought on diversification. There are funds that equal-weight the companies in the S&P 500 (giving each of the 500 companies an identical 0.2% weighting rather than weighting by market cap). These funds dramatically reduce concentration in the tech sector, but as a result have underperformed the S&P 500 over the last decade. International equity exposure adds diversification into economies and sectors that are less correlated with the U.S. and also diversifies other factors such as currency or political risk. Fixed income (bonds), real estate, and alternative strategies can also reduce the volatility that comes from being too heavily tied to tech sector swings. None of these approaches is universally "better" than owning the standard S&P 500, but they offer a different risk profile, and this week was a useful reminder of what the risk of being concentrated in one sector actually feels like.
The bottom line
Portfolio diversification is not just about owning a lot of different stocks. It is about ensuring that no single factor (one sector, one theme, one style of investing) dominates your returns. Some assets should be zigging while others are zagging. If all of your investments are moving in the same direction, your portfolio is not diversified.
A different way to think about agency in long term health & philanthropy
Water Contamination and Longevity: What's Real vs. Hype
Headlines about "forever chemicals" and heavy metals generate a lot of anxiety, but the science tells a more nuanced story. The key principle: dose and duration matter. Most contaminants in regulated public water systems stay well below harmful levels, but a few specific risks deserve attention.
What's overblown: Fluoride at the standard 0.7 mg/L is safe and genuinely benefits oral health (and by extension, whole-body health). IQ-related concerns come from studies at much higher concentrations. Mercury in tap water is also rare and well-regulated. The real mercury conversation is about seafood choices, not your faucet.
What's real but manageable: PFAS ("forever chemicals") warrant concern, and new 2024 U.S. regulations now set enforceable limits (4 ng/L for PFOA/PFOS). Detection isn't danger; exceeding the limits is what calls for action. Lead is genuinely harmful, especially for children, but it's mostly a building-level problem involving old pipes, solder, and fixtures rather than the treatment plant. Run cold water for a minute after long breaks and always cook with cold water.
What's underappreciated: The biggest overlooked risk is microbial. Bacteria thrive in stagnant building plumbing, and Legionella (the bacterium behind Legionnaires' disease) is a real, preventable hazard in buildings with poor water management. Ironically, neglected carbon filters can harbor more bacteria than unfiltered tap water.
The practical takeaway: Read your annual Consumer Confidence Report, run taps after overnight breaks, use cold water for drinking and cooking, replace filters on schedule, and test private wells yearly. Let the regulatory system handle the background risks. Your biggest leverage is simple habits at home.
To learn more, go to: Water Contamination and Longevity: What’s Hype, What’s Real?
The connection between this week's market story and the Personal Finance topic is not subtle. The reason Broadcom's earnings miss rippled through the greater market is precisely because the S&P 500 is far more concentrated in the tech sector than most investors appreciate. When a sector that represents 32% of the index gets hit with a 10–15% correction, the index takes real damage even if everything else is holding up fine. This is not a reason to panic and sell AI/tech stocks, it is though a reason to understand what you actually own.
Going forward, I am watching three things closely: first, the May CPI report coming out Wednesday, June 10 (any sign of inflation cooling would be welcome). Second, the trajectory of the Iran situation (I expect more volatility in the near-term). Third, and perhaps most importantly, whether the selloff spreads into other sectors or stays confined to AI/tech stocks. A rally in value stocks and other sectors that have lagged tech recently would be a healthy indication that this is just a minor recalibration of investors' AI/tech expectations.
The market has a way of humbling certainty. My old boss, Ken Fisher, used to refer to the stock market as "The Great Humiliator". Last week investors were certain that Iran was close to a peace deal and that AI/tech stocks had nowhere to go but up. This week reminded us that good investing means planning for multiple outcomes, not just the optimistic one.
Have a nice week ahead!
Kevin